Do You Need a Financial Advisor or Can You Manage Your Money Yourself?

By: Alex Bridges, CFP®, EA, ChFC®, RICP®

Do you really need a financial advisor, or can you manage your money yourself?

It's a fair question, especially if you've spent the last 20 or 30 years saving consistently, investing in your 401(k), and making sensible financial decisions without professional help.

I'm a financial planner, and I don't believe everyone needs to hire one. Some people are perfectly capable of managing their own investments, and paying an advisor simply to maintain a portfolio may not make sense for them.

But there's an important distinction I think gets overlooked: managing your investments and managing your entire financial life are two different things.

That difference becomes particularly important for people in their 50s and early 60s who are getting closer to retirement.

Can You Successfully Manage Your Own Investments Without a Financial Advisor?

Absolutely. You don't need a financial advisor to open a brokerage account, buy diversified investments, contribute to a retirement account, or maintain a long-term investment strategy.

If you've been investing for years, understand your risk tolerance, and have the discipline to stay invested through difficult markets, you may be comfortable handling your portfolio yourself. There is nothing inherently wrong with that approach.

In fact, one of the things I appreciate about working with financially engaged individuals is that they already understand many of the basics. They've done the hard work of saving, they've paid attention to their investments, and they want to understand the reasoning behind financial decisions.

The question I would encourage you to consider isn't necessarily whether you're capable of investing on your own. It's whether you have the time, knowledge, and interest to coordinate everything else that affects your financial future.

What's the Difference Between Investment Management and Financial Planning?

Investment management focuses on what happens inside your portfolio. Financial planning looks at how your investments interact with your income, taxes, retirement goals, insurance, and estate planning.

For example, choosing a diversified portfolio is an investment decision. Determining which accounts to withdraw from during retirement, when to claim Social Security, and whether a Roth conversion makes sense is a broader planning decision.

Those decisions aren't independent of one another. A withdrawal strategy can affect your taxable income, which may influence your Medicare premiums, available tax-planning opportunities, and how much money remains invested for later retirement years.

That's why I believe the most useful financial planning conversations often have very little to do with picking investments. The real work is understanding how the different pieces of someone's financial life fit together.

When Does Managing Your Money Yourself Start Getting More Complicated?

For many people, that turning point comes as retirement gets closer.

During your working years, the main financial objective may have been relatively straightforward: earn money, save consistently, invest appropriately, and let time work in your favor.

Retirement changes that equation. Instead of consistently adding money to your investments, you may need those investments to help support your lifestyle for several decades.

How Do You Know When You Can Afford to Retire?

Having a large retirement account doesn't automatically tell you whether you're ready to stop working.

You also need to consider your spending, Social Security benefits, healthcare expenses, inflation, taxes, and how your portfolio might respond to difficult market conditions.

When someone tells me they want to retire in the next few years, one of the first things I want to understand is what retirement actually looks like for them.

The goal is to develop realistic spending assumptions and evaluate whether their available resources can support those goals under different scenarios.

Which Retirement Accounts Should You Withdraw From First?

Imagine you've accumulated money in a traditional 401(k), Roth IRA, and taxable brokerage account.

You may have invested those accounts successfully for decades, but deciding how to use them in retirement introduces a different set of questions.

Withdrawals can have different tax consequences depending on the account and the circumstances. The IRS explains the rules governing traditional and Roth IRA distributions in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

For some retirees, it may make sense to draw from multiple account types rather than relying on one account exclusively.

The appropriate strategy depends on current and future tax considerations, spending needs, investment allocations, and other sources of income.

Should You Consider Roth Conversions Before Retirement?

Roth conversions are another area where investment decisions and tax planning overlap.

Moving money from a traditional retirement account into a Roth IRA may create taxable income in the year of conversion, as outlined in IRS Publication 590-B.

For some households, converting money during particular years may fit into a longer-term tax strategy. For others, the immediate tax cost and related consequences may outweigh the potential benefits.

What matters is evaluating the conversion as part of your larger financial picture rather than assuming everyone should do one.

That's the type of decision where a financial planner and qualified tax professional can help evaluate the tradeoffs.

What Happens When Required Minimum Distributions Begin?

Another consideration is required minimum distributions, commonly called RMDs.

Under the IRS's Retirement Plan and IRA Required Minimum Distributions guidance, many traditional retirement accounts are subject to mandatory distributions once the owner reaches the applicable age, which varies based on birth year and account circumstances.

RMD planning can become especially relevant when someone has substantial traditional retirement assets.

Reviewing future distributions before they begin can help you understand how retirement income and taxable income may change over time.

What Can a Financial Advisor Actually Do That You Might Not Do Yourself?

I think a good financial planning relationship should provide more than an investment allocation and an occasional portfolio review.

The value should come from understanding your financial situation, helping you evaluate important decisions, and keeping your plan coordinated as circumstances change.

For someone preparing to retire, that could mean working through several important areas:

• Retirement income: Evaluating how pensions, Social Security, investment withdrawals, and other income sources may work together.

• Tax planning: Reviewing Roth conversions, withdrawal strategies, capital gains, charitable giving, and potential tax consequences.

• Investment management: Building and maintaining a portfolio that reflects your goals, time horizon, and willingness to accept risk.

• Insurance and risk management: Reviewing coverage needs, healthcare considerations, and potential financial vulnerabilities.

• Estate planning coordination: Reviewing beneficiaries, legacy goals, and the need to work with an estate planning attorney.

• Ongoing decision-making: Revisiting your plan when markets, tax laws, family circumstances, or personal goals change.

Some people enjoy handling all of these responsibilities themselves. Others prefer to have a professional help them evaluate the decisions, identify potential gaps, and maintain a coordinated strategy.

Neither approach is automatically right or wrong. The value of professional financial planning depends on your circumstances and what you actually need help accomplishing.

Is a Financial Advisor Worth the Cost If You Already Know How to Invest?

This is where I think the conversation about financial advisor fees becomes important.

If you already understand investment management, you should be able to ask exactly what you're paying an advisor to do beyond managing your portfolio.

Some financial advisors charge a percentage of the assets they manage, often referred to as an assets-under-management or AUM fee. Others charge hourly fees, project-based fees, or flat ongoing fees.

Consider a hypothetical household with a $2 million investment portfolio.

At an advisory fee of 1% annually, that would equal $20,000 per year, before considering any additional investment-related expenses.

That arithmetic doesn't tell you whether the advisor is worth the cost. The relevant questions are which services are included, how much planning is being provided, and whether the relationship offers value relative to the fees.

It's also important to consider the total cost of investing. The SEC's Investor Bulletin on Form ADV explains that an advisor's disclosure brochure includes information about compensation, fees, conflicts of interest, and services.

Could a Flat-Fee Financial Advisor Make More Sense for Someone Who Manages Their Own Money?

Potentially, and this is one of the reasons I structured my own firm around flat fees.

I wanted the cost of financial planning to reflect the complexity of the work being done rather than automatically increasing as a client's investment accounts grow.

At Tiverton Wealth, LLC, we're a fee-only Registered Investment Advisor that charges 100% flat fees for our advisory services. We don't earn commissions from selling investments, insurance products, or annuities.

Our fees are established in dollar amounts based on the complexity of a client's situation and the services provided. They aren't calculated as a percentage of the investment portfolio, and the scope and cost of the relationship are agreed upon before work begins.

For clients who want ongoing assistance, our financial planning services can include retirement planning, investment management, tax planning coordination, insurance analysis, and estate planning coordination.

Eligible clients can also receive tax preparation through Tiverton Tax, LLC, a separate affiliated business, under its own engagement agreement.

It's worth emphasizing that flat fees aren't automatically less expensive than percentage-based fees. Depending on the size of your portfolio, the services you need, and the fee structure, different approaches can produce different total costs.

What I like about the flat-fee approach is that it makes the price of the planning relationship easier to evaluate independently of the account balance.

You can learn more about our approach to flat-fee financial planning and investment management.

Can You Keep Control of Your Financial Decisions While Working With an Advisor?

Yes. Hiring a financial advisor doesn't mean you have to stop asking questions, learning about investments, or participating in important financial decisions.

In fact, I think clients should understand why a recommendation is being made.

If we're discussing a retirement date, a change to an investment portfolio, or a potential Roth conversion, the reasoning and tradeoffs should be part of the conversation.

There are different types of advisory relationships, including planning-only arrangements and ongoing investment management. The services, authority over investments, and responsibilities of each party should be clear in the advisory agreement.

For someone who enjoys investing, the right relationship may be one that adds planning expertise and a second perspective without taking away their involvement.

The goal is to find a service arrangement that fits how you want to manage your financial life.

How Do You Know Whether a Financial Advisor Is Acting in Your Best Interest?

One of the first questions I would ask is how the advisor is compensated and what conflicts of interest might exist.

Understanding those details can help you evaluate whether the relationship is structured around the services you actually need.

Registered investment advisers owe fiduciary duties to their clients within the scope of the advisory relationship.

The SEC discusses these obligations, including duties of care and loyalty, in its 2019 Commission Interpretation Regarding Standard of Conduct for Investment Advisers, Release IA-5248, under the Investment Advisers Act of 1940.

CFP® professionals are also subject to professional conduct requirements.

Under the CFP Board Code of Ethics and Standards of Conduct, Section A.1, Fiduciary Duty, a CFP® professional must act as a fiduciary when providing financial advice to a client.

Being a fiduciary doesn't eliminate every potential conflict, and a professional designation alone doesn't tell you everything about an advisor.

I encourage people to review the advisor's compensation, services, disclosures, and regulatory history before making a decision.

For additional information about evaluating an advisor's services and compensation, you can also review Tiverton Wealth's frequently asked questions.

When Might You Be Better Off Managing Your Money Yourself?

There are absolutely situations where continuing to manage your own money can be reasonable.

If your finances are relatively straightforward, you have a documented plan, and you understand the tax and retirement implications of your decisions, you may not need ongoing professional assistance.

That may be particularly true if you're comfortable researching financial topics, reviewing your plan regularly, and adjusting your strategy when your circumstances change.

I would also question the value of hiring an advisor if the services being offered don't address anything you actually need help with.

Paying an ongoing fee without a clear understanding of what you're receiving is something I would encourage anyone to examine carefully.

Sometimes a one-time planning engagement or a second opinion may be more appropriate than an ongoing relationship. Other times, managing everything yourself may remain the most practical choice.

When Should You Seriously Consider Hiring a Financial Planner?

I would encourage someone to consider professional planning when the financial decisions they're facing become more interconnected or consequential.

Retirement is a common example, but it isn't the only one.

You might benefit from a conversation with a financial planner if:

• You're within five years of retirement and aren't confident about your retirement income strategy.

• You have substantial balances across traditional retirement accounts, Roth accounts, and taxable investments.

• You're considering Roth conversions or other tax-sensitive retirement decisions.

• You and your spouse have different retirement dates, pensions, or Social Security considerations.

• You've inherited assets, sold a business, received a large bonus, or experienced another significant financial change.

• You enjoy managing investments but don't want to spend your retirement coordinating every financial and tax decision yourself.

None of these situations automatically means you need an advisor. They are simply examples of circumstances where an additional professional perspective may be useful.

How Should You Decide Whether to Hire a Financial Advisor?

Before interviewing advisors, I would start by asking yourself what you actually want help with.

Are you looking for someone to select investments, build a retirement income plan, review your tax strategy, or help coordinate several moving pieces?

Once you know what you're looking for, ask prospective advisors what work they will perform, how frequently they'll review your plan, whether you'll work directly with the same professional, and what the total relationship will cost.

You should also understand whether the engagement requires you to transfer or delegate management of your investments.

Then compare the proposed services with the responsibilities you're comfortable handling yourself.

The right decision isn't necessarily the cheapest option or the one with the most services; it's the arrangement that fits your actual planning needs.

Looking for a Flat-Fee Financial Advisor in The Woodlands, TX?

I'm Alex Bridges, founder of Tiverton Wealth, LLC, a fee-only Registered Investment Advisor based in The Woodlands, Texas.

We provide fiduciary financial planning and investment management for individuals, families, professionals, business owners, and retirees in The Woodlands, the Greater Houston area, and other jurisdictions where we're properly registered or exempt from registration.

Our approach focuses on bringing retirement planning, investments, and tax considerations together through a comprehensive financial plan.

We charge flat fees rather than a percentage of the assets we manage, and our goal is to help clients understand their options and make informed financial decisions.

If you've successfully managed your investments for years but are beginning to wonder whether your retirement plan needs another set of eyes, that's a reasonable conversation to have.

You can learn more about my background and approach to financial planning or explore our services at Tiverton Wealth.

Our office is located at 2001 Timberloch Place #500 The Woodlands, TX 77380. You can reach us at 281-865-8858 or alex@tivertonwealth.com to discuss whether our services may be appropriate for your circumstances.

You can review my full regulatory background on the SEC's Investment Adviser Public Disclosure website: Alex Bridges — IAPD record.

This article is provided by Tiverton Wealth, LLC for general educational and informational purposes only. It does not constitute personalized investment, tax, or legal advice, and should not be relied upon as a substitute for advice from a qualified professional familiar with your specific circumstances. Tiverton Wealth, LLC is a fee-only Registered Investment Advisor providing services only in jurisdictions where it is properly registered or exempt from registration. Investing involves risk, including the possible loss of principal, and no strategy can guarantee a profit or protect against loss. Past performance is not indicative of future results. Please consult with a qualified financial, tax, or legal professional before making decisions based on this content.

Frequently Asked Questions About Financial Advisors and DIY Investing

Do I Really Need a Financial Advisor if I Can Manage My Own Investments?

Not necessarily. If you're comfortable managing your portfolio and have a comprehensive plan for retirement income, taxes, insurance, and estate planning, you may be able to handle your finances without ongoing professional advice.

A financial advisor can become useful when you want help coordinating more complicated decisions or evaluating areas outside investment management.

Is It Worth Paying a Financial Advisor 1% of My Portfolio?

That depends on the services you receive and how those services compare with your needs.

For example, a 1% annual advisory fee on a $1 million portfolio equals $10,000 per year, excluding any additional investment expenses.

Some people may find value in that arrangement, while others may prefer hourly, project-based, or flat-fee financial planning.

What Is the Difference Between a Flat-Fee Financial Advisor and an AUM Advisor?

A flat-fee advisor charges an agreed dollar amount for specified services, while an assets-under-management advisor typically charges a percentage of managed assets.

Neither pricing structure automatically determines the quality or suitability of the advice.

Investors should compare total costs, scope of services, compensation conflicts, and the advisor's experience.

Should I Hire a Financial Planner Five Years Before Retirement?

Five years before retirement can be a useful time to review your financial plan, particularly if you're unsure how much you can spend, when to claim Social Security, or how to manage retirement withdrawals.

Planning before leaving the workforce may provide more opportunities to evaluate different approaches.

Whether you need a professional depends on the complexity of your finances and your comfort managing those decisions yourself.

Can a Fee-Only Financial Advisor Help With Taxes and Retirement Planning?

Yes, depending on the advisor's qualifications and the scope of the engagement.

Financial planners may help evaluate retirement withdrawals, Roth conversions, investment-related taxes, and other planning considerations.

At Tiverton Wealth, LLC, financial and tax planning are coordinated, while eligible clients may receive tax preparation services through the separately organized Tiverton Tax, LLC under its own engagement agreement.